Archive for March, 2010

UK national debt is at very dangerous levels

March 25th, 2010

In recent months all of our politicians have failed to really grasp the nettle and really outline the size of UK’s debt and how it is going to be addressed.

The figure revealed in the details of the March 2010 budget (not given airtime in the House of Commons) is £1.4 trillion.  That is 1,400 x £1 billion, or 1.4 million x £1 million.  It is a huge amount of debt.

Look at it another way, we currently have approximately 27 million people working and paying taxes.  The £1.4 trillion debt equates to almost £52,000 for every one of those 27 million tax payers.

Somehow the UK Government has to deal with the vast debt, somehow we, the British public, are going to pay off this debt through a combination of tax increases and cuts in services. 

Lets assume that the UK national debt is not cut and we stay at £1.4 trillion.  Today the interest rates are low, but it may be reasonable to assume in a few years time we could be paying as much as 5% on this debt, that would mean annual interest payments of £70 billion.

Prior to the credit crunch the UK was borrowing at a rate of less than £50 billion a year to fund the budget deficit.  So in “good times” we might assume we only need to borrow £50 billion a year.  But if we now add the possible annual interest of this vast £1.4 trillion debt we will need to borrow an additional £70 million a year, giving a total of £120 million a year including the annual budget deficit.

These figures are unworkable, unless the UK national debt is cut we could have a prolonged period of economic turmoil.  Whoever gets elected lets hope this issue of cutting UK’s debt gets more attention.

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The UK economy and strikes

March 23rd, 2010

Following the high profile campaign of Unite in its conflict with British Airways there are now other companies including British Gas where the threat of strikes loom.

What is it with the union culture, are they led by egotistical union management who like to flex their muscles and show their membership that they are worth their vast wages? 

Or maybe there really is unfairness on part of the companies such as British Airways in their treatment of staff?

A straw pole of people we have spoken with suggest that the majority of people do not support the strikers who in many cases are very well paid, not forgetting the 4 million plus “economically inactive” people of working age who do not have a job.

In today’s world of employment legislation to protect the worker, and the increased flexibility for people to move jobs, do we really need unions to “fight the cause” of the worker? Moreover should such workers going on strike have the right to disrupt the lives of other hard working individuals through what some might see as a selfish action?

Jobs for life are no more, the vast majority of the working population will change jobs several times during their careers, so do we really need a protectionist and outdated union culture to stand up for “the worker”?

Going back to the specific case of British Airways.  The industry is hugely competitive and has undergone major change with the increase in low cost flights, it is clear the British Airways has to change its cost base, and sadly that will mean some redundancies, changes to working practices, etc.  Simply going on strike, disrupting the lives of many ordinary people and damaging the UK economy does not seem to be a sensible approach. 

To make matters worse our political system is affected by those who “sponsor” parties through “political donations”, as such the recipients of the donations are not in a position to act without bias against the hands that feed them – in this case the unions.

Lets hope common sense will soon prevail, if not the unions will gradually sink the British economy.

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Posted in UK Economy

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New build – dangers of buying off plan

March 11th, 2010

Over the last decade there have been numerous developers selling off plan with buyers paying a modest deposit to secure purchase as a fixed price on completion of the development.  In the rising property market this has been great news for many investors who managed to sell on their contracts for a tidy profit without ever buying the property.  But now the tables have turned.

Property developers who sold almost anything off plan from hotel rooms through to luxury houses are now following through on build completions only to find that many buyers no longer want to purchase, willing to forfeit their deposits rather than purchase today at prices set in the peak of the property market.  It seems like a good idea, just lose your deposit of say £10,000 rather than buy a property at £50,000 over value?

Unfortunately for many who purchased off plan they did not read the small print, in many cases there were clauses such that if another buyer was not found for the purchase price agreed then the original off plan buyer becomes liable for the shortfall.  Today there are cases of legal action being pursued against off plan buyers who walked away from their commitment to buy.  Developers are suing for the losses incurred from reduced selling prices and marketing fees.

Not a pleasant situation for the off plan buyer, but on the positive side we are near the bottom of the property cycle (no one knows for sure), but buying off plan today with two years to completion may not be a bad deal – that is assuming you know you can raise the required bank finance when the property is completed.

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Posted in New Build